Coca-Cola's experience with inventory forecasting
Supply chain management is the careful attention paid to the process that sees materials, information, and finances move from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management focuses on efficiently and effectively coordinating the flows of the supply chain process both within and between companies. Often, the main goal of supply chain management is to reduce inventory, thus resulting in better efficiency and reduced costs. Here are a couple of general descriptions of the inventory control problem:
Almyta Systems (2009) Overview of inventory control. Retrieved Feb. 21, 2009, from http://systems(dot)almyta(dot)com/Inventory_1.asp and http://systems(dot)almyta(dot)com/Inventory_2.asp
Since 1986, the Voluntary Interindustry Commerce Solutions Association (VICS) has worked to improve the efficiency and effectiveness of the entire supply chain. ... VICS is made up of companies who have proven that a timely and accurate flow of product and information between trading partners significantly improves their competitive position. It has been demonstrated that cross-industry commerce standards facilitate better customer service while reducing costs. VICS' participation with hundreds of small and large companies has established that the implementation of VICS' business processes and standards achieve excellent returns that go far beyond initial expectations."
The VICS Collaborative Planning, Forecasting & Replenishment (CPFR®) Committee has had as its mission:
"... to develop business guidelines and roadmaps for various collaborative scenarios, which include upstream suppliers, suppliers of finished goods and retailers, which integrate demand and supply planning and execution."
You can read a summary of their work here:
VICS (N.D.) Overview of Collaborative Planning, Forecasting & Replenishment (CPFR®). Retrieved January 10, 2014, from http://www(dot)gs1us(dot)org/DesktopModules/Bring2mind/DMX/Download.aspx?Command=Core_Download&EntryId=631&PortalId=0&TabId=785
Now let’s consider a real-world description of an application of forecasting to inventory control:
Murphy, J. (2002) Enabling its field sales managers to collaborate on forecasts allowed Coca-Cola Bottling Co. Consolidated to slash inventories in half while absorbing 150 new products. Global Logistics & Supply Chain Strategies—November. Retrieved Nov. 8, 2010, from http://www(dot)glscs(dot)com/archives/11.02.coke.htm?adcode=5
After reading these articles, reviewing information from the Background readings, and researching other sources on your own, prepare a 3- to 4-page paper on the following topic:
True or false: Coca-Cola's experience with inventory forecasting supports the principles set forth by CPFR. If so, how? If not, why not? Be sure to take a clear stand.
Case Assignment Expectations:
Your paper should be from three to five pages. Take a definite stand on the issues, and develop your supporting argument carefully. Using material from the Background information and any other sources you can find to support specific points in your argument is highly recommended; try to avoid making assertions for which you can find no support other than your own opinion.
You will be particularly assessed on:
- Precision: Draw on a range of sources and establish your understanding of the historical context of the question. Carry out the exercise as assigned, or carefully explain the limitations that might have prevented your completing some parts. (Running out of time isn’t generally considered an adequate limitation.)
- Support for assertions: Use examples, citations (especially to the required readings), and elaboration to support assertions. Provide evidence that you have read the required Background materials.
- Clarity: Provide clear answers that show good understanding of the topic. Understand the module's purpose, and structure your paper accordingly.
- Breadth and depth: Make the scope of your paper relate directly to the questions of the assignment and the learning outcomes of the module.
- Critical thinking: Incorporate your reactions, examples, and applications of the material to business in a way that illustrates your reflective judgment and good understanding of the concepts. Read the Required Readings posted in the Background material plus others you find relevant. Providing informed commentary and analysis is vital—simply repeating what sources say does not constitute an adequate paper.
- Overall quality: Turn in a well-written paper whose references, where needed, are properly cited and listed. (Refer to the University guidelines (http://support(dot)trident(dot)edu/files/Well-Written-Paper.pdf if you are uncertain about formats or other issues.)
Coca-Cola's experience with inventory forecasting
Name
Course
Tutor
Date
Introduction
Inventory forecasting largely involves the estimations made of a particular product or services that consumers will purchase. It may include informal methods such as educated guesses and other methods such as use of historical sales data from markets. This method may apply in pricing of goods or services or assessing the possibilities of entering a new market therefore, facilitating the relationship between trading partners (the seller and the buyer) and eventually transaction. According to VICS website, Collaborative Planning, Forecasting and Replenishment (CPFR®) – a business concept used by Coca Cola, “is a business practice that combines the intelligence of numerous trading partners in the development and fulfillment of customer demand.” CPFR, aims on the efficiency of the flows of supply chain to fulfill customer demands while reducing inventory thus reducing the cost which results to better efficiency. Companies such as Coca-Cola have experienced this kind of inventory forecasting. In this paper we look at the company’s experience with CPFR in the relation to the principles it sets forth (Diederichs, 2009).
Background information
Coca-Cola Company is the largest soft drink company and it markets top leading soft drinks such as Coke, Diet Coke, Sprite and Fanta. Other brands including Powerade and Dasani mineral water are marketed under the same company. With its customer service in more than 200 countries, it boasts of the largest distribution system. The company estimates the consumption of its products at more than one billion units in a single day. Of course, the market fluctuates due to price changes and other things such as competitions and promotions which put the need to forecast and also brings challenges in the same. The four fundamental points of CPFR are; Strategy planning, Supply and Demand management, Execution and Analysis (Diederichs, 2009).
Coca-Cola enabled its sales managers to collaborate on forecasts, which saw its inventories slashed by half and absorbing 150 new products. Initially, when Coca-Cola did not have a worldwide market distribution, it was easy for the company to replenish the stores as all was needed is deliver the needed quantity. Worldwide distribution was faced with more complexities as due to market dynamics such as the customers engaging in aggressive discounts and frequent promotions with or without little notification to the bottler. This would then result in a confused situation when the bottlers would find themselves often shipping the wrong packages to the distributors as said by Brian Wieland, director of demand planning at CCBCC "We were very efficient at producing product, but we really didn't know what we should be maki...